Nasdaq Buys Anti-Financial Fraud Firm Verafin for $2.75 Billion

Nasdaq Buys Anti-Financial Fraud Firm Verafin for $2.75 Billion
November 20, 2020

 

Exchange operator Nasdaq Inc (Nasdaq: NDAQ) stated on Thursday that it is acquiring Verafin, a software firm focused on identifying financial frauds, in an all-cash deal worth $2.75 billion. The agreement enables Nasdaq to widen its foothold in the regulatory technology domain. The acquisition deal is the largest for Nasdaq since its $3.80 billion takeover of Nordic exchange OMX twelve years ago. Following the news release, the stock closed at $124.76, an increase of $2.03 or 1.65% from the prior close.

St. John’s-Newfoundland-based Verafin, established in 2003, serves over 2,000 North American financial institutions with a cloud-based platform to identify, scrutinize and report financial frauds, including money laundering. Upon takeover, Nasdaq intends to offer Verafin’s technology to about 250 banks, broker-dealers, exchanges, regulatory organizations, and buy-side institutions that currently utilize its trade surveillance platform.

The deal indicates that the exchange group is planning to enter the anti-money laundering software industry in a big way and increase its strategy of rebranding the company as the prominent fintech and data provider. In the past four years, revenues generated from the market technology and investment intelligence division has increased by 54%, with non-trading revenues accounting for 73% of the exchange group’s aggregate revenues.

Even though Nasdaq is well-known for running exchanges in the US and worldwide, it is also a major vendor of market-related technology to banks and other financial institutions.

Nasdaq already has a firm base in the market pertaining to trade surveillance software and the trading technology systems industry. The company took its foremost step in the anti-money laundering software market in September when it rolled out artificial intelligence technology to assist retail and commercial banks in mechanizing the process of scrutiny.

Valerie Bannert-Thurner, senior vice president and head of sell-side and buy-side solutions, market technology at Nasdaq, said, “The problem of detecting money laundering and fraud hasn’t been solved very well yet. With our acquisition, we are doubling down on our belief this as an area that is being disrupted and where we can have a big impact.”

Nasdaq’s initiative has come at a time when banks and other financial institutions are working towards automation of their costly and cumbersome back-office procedures to minimize costs and boost efficiency. This consists of compliance and surveillance operations, where expenses have been rising considerably following stringent regulatory clampdown over the last ten years.

In spite of this, as much as $2 trillion is laundered worldwide every year, accounting for 5% of international GDP, as per the United Nations. The takeover indicates another landmark in Nasdaq’s initiatives to diversify its revenue flow outside trading, which continues to witness a drop in fees.

Nasdaq will fund the transaction through a combination of debt ($2.50 billion) and cash. Accordingly, starting in 2022, the exchange will generate earnings from the investment.

The takeover news is expected to keep the stock range-bound with a slight bullish bias in the near-term.

The historical price chart indicates that the stock is trading above its 50-day moving average. The stochastic RSI indicator is in the oversold region. Furthermore, the stock also has solid support at 124 levels. Therefore, we are anticipating the stock to rally further in the days ahead.

ndaq - technical analysis - 20th November 2020

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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